Dynamic Pricing of Duopoly through Pricing Game Based on Price Discrimination

We discuss in this paper whether two members in duopoly market will make benefit from dynamic pricing based on price discrimination. In addition, we want to know which one in duopoly market will make more profits through dynamic pricing in a pricing game. We set the case to a pricing game in Hotelling model where two firms will perform a fierce price war to grab the market share of switchers under the prerequisite of ensuring the profit of the loyal through dynamic pricing based on price discrimination. We conclude that firms which implement dynamic pricing based on price discrimination will be better off than those not. In addition, we can reach a crucial conclusion that the firm which embraces a strong power of monopoly advantage and charges a higher price in the duopoly market is sure to make more profits through dynamic pricing based on price discrimination, while the other firm will make less profit in the pricing game undoubtedly.